The share price of British American Tobacco (LSE: BATS) (NYSE: BTI.US) is currently down just over 1%, following publication of an interim management statement for the three months to 31 March 2014. At constant exchange rates group revenue was up 2%, but adverse currency movements in the company’s key markets resulted in a 12% fall in group revenue at current rates of exchange.
The company reported that it had “delivered an improved volume performance“, although the “improvement” only means that the rate of decline in cigarette sales has slowed a bit — at 158bn sticks, sales were down just 1% in the first three months of the year. The company attributes the improved performance to the “continued strong growth” of its five “Global Drive” brands — Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans — for which volumes rose 6.3% overall.
However, sales of fine cut tobacco were down 2.9%, with market declines in Italy, Spain and France only being partially offset by growth in Germany and Belgium. But the company reports that sales volumes of fine cut global brands Pall Mall and Lucky Strike actually grew.
BAT says that volumes in emerging markets, such as Bangladesh, Pakistan, Indonesia are increasing, but that the trading environment in Western Europe “remains challenging“.
The company also reports that it resumed its share buy-back programme on 28 February 2014, and that during the three months to 31 March 2014, it bought 5.4 million shares at a cost of £175m (excluding transaction costs).
Commenting on the trading statement, Chief Executive Nicandro Durante said:
“This is a good underlying performance, underpinned by an improving trend in volume. We have grown revenue at constant rates of exchange and our pricing remains on track. Our market share continued to grow, driven by the strength of our Global Drive Brands. Although foreign exchange remains an issue for reported results, it is a good start to the year. I remain confident of delivering consistent growth in earnings in constant currency terms, which we will recognise with an increase in the dividend.“
At 3,450p BAT’s share price is down almost 3% on this time last year, compared with a 5.4% rise in the FTSE 100 over the same period.
